Value Chain and Globalization Essay

Value chain and globalization Introduction The process of corporate life is always a sea change and sometimes there are high tides and sometimes are quiet times. Day to day companies are faced with new challenges, whether it be a consolidated organization or a small business just starting, always emerging issues that affect their behavior and their performance. Owing to the consequences of an impressive development of technology and globalization that we are living in this age. Nowadays are faster changes, new challenges threaten seriously survival of organizations, new foreign competitors, mobilization of capitals, difficulties in retaining human capital and changing technologies are elements that require managers to be prepared for change and have ability to motivate employees in order to have continuous renewal. “Micro and small enterprise dominated industries have been both threatened and provided with advantages as a result of dynamic trends related to globalization” (Kula et al., 2006). Value chain is not only to implement new management models that ultimately prove to be only uncertain. However, management of change consists of take advantage of changes in business environment for the interest of the organization. That is why companies should not only be flexible, but also managers should develop a keen sense to anticipate change; therefore companies will be able to achieve to be at the forefront. According to Porter (1998) “Activities provide the bridge between strategy and implementation. When strategy was defined in terms of broad positioning concepts, a clear separation between strategy and structure was meaningful and useful.” Innovation is everywhere and organizations that are not renewed will hardly be able to survive. Firstly, it should be noted that the purpose of this essay is that I want to explain what is the value chain, its impact to the companies and the impact of globalization to the value chain. Afterwards, I will explain the following seven major issues have had significant impact of globalization on the value chain.

History of the value chain and consisting

First of all, the value chain is a theoretical model to describe the development of the activities of a business generating value to the final customer. The value chain was described by Michael Porter. He defines the value as the sum of the perceived benefits customer receives of low costs to acquire and use product or service “Value is the amount buyers are willing to pay for what a firm provides them. Value is measured by total revenue, a reflection of the price a firm´s product commands exceed the cost involved in creating the product.” (Porter 1998). At the same time value chain is essentially a form of analysis of business through which a company is split up into their constituent parts, and we can seeking to identify sources of advantage. Simultaneously, it is creating the competitive advantage that is achieved when company develops and integrates activities of its value chain less expensive and better differentiated than their competitors. Therefore value chain of a company is formed by all its added value generating activities and the margins they contribute “Competitive advantage in regard to products and services takes two possible forms. The first is an offering or differentiation advantage. I f customers perceive a product or service as superior, they become more willing to pay a premium price relative to the price they will pay for competing offerings. The second is a relative low-cost advantage, which customers gain when company´s total costs undercut those of its average competitor” (San Miguel, 1996). Sometimes change times in business can generate fear, but beyond fear, managers must generate within their companies the ability to bring about change. When it comes to making changes to the companies and this usually means the introduction of new procedures, staff or ways of working that directly affect those around the organization: employees, shareholders, suppliers, customers. Therefore managers have two options to deal with the changes. The first option is intimidated by the changes and remaining still or the second option is to understand what is going on, develop strategies and implementation to deal with change. “Competitive Advantage provides the architecture for describing and assessing strategy, linking it to company behavior, and understanding the sources of competitive advantage. It provides the foundation needed to go deeper.” (Porter 1998)

According to Kula (2006), Globalization is a process by which people, companies, goods and services, capital and information and ideas are exchanged across international boundaries, is

shaping opportunities for growth and poverty reduction in developing countries. In the current context of globalization, the trend toward merging business grows increasingly harder. Therefore, it is very important to cooperation of all employees of organization in a chain and they sharing common vision for business quickly translate into success factors. Where employees are involved to this vision therefore they will be more productive and more collaborative mechanisms bind them to other actors in the chain, the greater the chance of survival and progress towards economic development processes. Moreover, companies tend to compete with other companies in the same country and in the same way, companies of the same country tend to compete with companies in other countries a cause of globalization. Therefore, competition among global companies are strongly and should possess highest level of professional competence and for this reason heads of companies should know as renew companies every day to produce high return. A good example about this information is the competence between Procter and Gamble and Unilever; both are global companies and both offer similar products. In the case of my country; In Mexico are both companies each one have both have large factories and corporate offices; the number of employees is large and both have many processes to manufacture both products, as well as quality and administrative. CEO´s of each company must be updated on how to improve processes in each part of the business, the should evaluate the process and trying to reduce as many errors and waste in order to offer the best products and the best price cheaper for the end customer. So also promote more featuring your product compared with the rest of their competition, as to promote values, social responsibility, brand linkage and sometimes prizes and raffles. Another key point, managers of big companies know that linking brand starts when people are young children and this is why, one of their main sector of society are children. Because marketers know that if a child comes to impregnate a brand in in their childhood, they will take for all their life and therefore they will transmit to their offspring in the future. I see this reflected in my case, since I always prefer to drink Coke when I am eating and I never liked Pepsi since my childhood, this is because since my childhood always drank Coca-Cola by the influence of my mother. To date I still drink coke, this is an example of how a global company that has implemented the value chain in their structural processes relevant their product has made in my life. “For a firm to achieve superior differentiation, it must utilize the best mix of resources in

creating value for its customers. In order to prioritize its processes as sources of differentiation, a company must determine what attributes of each process enhance customer value” (San Miguel 1996). 1) Competitive advantage considerations The competitive advantages are the fundamental capabilities that put an organization over competitors. Is that company does much better than competitors, so it is a force to compete and specialized experience that the competition cannot match. There appears then to be acceleration in the growth of a business strategy is powerful if it causes or results in a significant and lasting competitive advantage; is weak if the results not to be successfully and consequently is a competitive disadvantage. Confirming this claim, Porter (1998) “Competitive advantage grows fundamentally out of value a firm is able to create for its buyers that exceeds the firm´s cost of creating it. Value is what buyers are willing to pay, and superior value stems from offering lower prices than competitors for equivalent benefits or providing unique benefits that more than offset a higher price”. In this manner the competitive advantages are the power, imagination, agility, experience, knowledge about strengths and weaknesses of opponent, information and finally the winner the battle it will be the one have made better use of resources and adequate manner. A good example about competitive advantage considerations are the case of the American company Wall-Mart that their goal is always offer the cheapest prices into markets. A good example about competitive advantage considerations is the case of the American company WalMart that their goal is always offer the cheapest prices into markets and in the case in Mexico, Wal-Mart Mexico is the biggest group of supermarkets because the goal of this company is to offer more variety of products and open more shops. 2) Corporate social responsibility considerations An important aspect in business strategy is to interact more with society, this means that those companies that reflect the impact of needs and goals of the population, through projects involving the community and contribute to a better quality of life; should also seek strategies warranting protection of the environment; policies that are concerned with employees, among others. As such strategies make integrated part of the so-called corporate social responsibility.

Moreover, the idea of better business, competitive, efficient and profitable, framing a concept that it is unclear and may be too forward throwing a definition about him, he is enthroned as an essential component in businesses or organizations looking to be much more that success in today's markets. This component is corporate social responsibility. This term because of the complexity in its implementation, given sample of firms that are fair, balanced, inclusive, legalistic, socially active and environmentally responsible. Furthermore, companies seek through rules or laws, their own abilities and innate voluntarism meet those requirements, is intended to establish the constant interaction between economic, social, cultural and environmental issues, making this a reliable source for the continued development of clearly responsible companies. This is reflected through en the example with Coles, as the company focuses on three approaches, sustainability, national charity partners and local charity support. Coles is helping charities not for profit organization like Guide Dogs Australia, Cancer Council, Food Bank and more charities. On the other hand, the supermarket company is working closely with environmentally responsible growers and suppliers, developing efficiencies with their supply chain. They are working about waste reduction, recycling and reducing greenhouse gas. When the company opens a new supermarket supports offering employments in the community and also offering vibrant and supportive environment to work in plus and great career opportunities. 3) Cultural considerations Nowadays, the value chain has been developed through globalization in all around the world on profitability and the advantages to be gained by that chain. But in each country is very different the ways of processes are performed in the companies. In recent years, China and India have had excellent development and economic growth, as they are cultures that make people work more than eight hours and CEO´s know how to do great business trying to make cheaper products and low wages in labor. Moreover, this is not good for the health and quality of life for employees. Taking up the topic about cultural considerations, "While Most R & D internationalization still takes place within the OECD area, developing countries are increasingly attracting R & D centres, although these remain relatively small in a perspective overall. Large Increases in foreign R & D investment in Asia, in particular in China and India, have attracted much attention in recent years.” (Staying Competitive in the Global Economy 2008)

4) Financial considerations The area of finance has the responsibility of independent, objective assurance and consulting designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the efficiency of the processes of risk management, control and governance processes. For many professionals in the finance department are focused on addressing the development and improve on what companies more than just a job for verifying compliance of policies and procedures. Financial department of a company must adopt and use the value added. this is reflected when finance specialists know how to implement processes to improve on issues like obtaining efficient financial resources, profitability, value added and translation of financial resources into economic resources, or conversion of savings into investment. 5) Human resources considerations The Human Resources function in business has changed considerably in recent years, some organizations began to provide the area staff training and career development opportunities, replacing the word "personal" by "human resources" with a new concept. It was no longer considered a cost but an asset. In the past HR was considered an area of the company purely administrative role has gone on to become in many cases in a strategic area of the organization. Achieving good results was a constant concern for management who began to realize the human side of the persons in the organization, moving towards a proactive and participatory position in strategic decision making. A clear example of value chain in human resources is when employees are looking for satisfaction with their work and eliminate those functions or unnecessary or costly tasks that do not contribute to the value. In my case, I worked for two years in the area of Assessment and Management of Talent in Mexico City and the value chain in the company where I worked is reflected in the value analysis is an organized approach to analyze jobs and the variables that affect them, to examine how work creates or adds value to the ongoing processes of the organization. 6) Political and economic considerations

Economics is the science of scarcity because of resources are limited and needs are unlimited, so there must be a hierarchy in the satisfaction of needs, therein lies the importance of economics in business and government. One reason why businesses fail is because they do not manage resources efficiently. A company must manage the scarce and limited resources efficiently not get bankruptcy, do not spend more than income permits. A company must be solvent and profitable, first be solvent means having enough cash to make payments, suppliers and banks, for that requires carrying a good cash flow, cash inflows that are greater than cash outflows, and if it were the other way round, it could be insolvent. Being profitable means that business income outweighs the costs, for get good management is required to make good decisions in the administration of statements of profit and loss. Is essential doing excellent management for to make good decisions, constantly innovating and finding new products to meet unlimited needs. However, in the case of politics in the governments of each country, income taxes are collected and expenses are those intended for the public sector can operate efficiently as spending on education, health, defense, pensions, and interest on debt transfers. 7) Technological considerations Recently, technology has drastically developed and therefore plays a role increasingly more important in life in general, but particularly in enterprises, which are subjected due to the opening of markets, an increased competition. “Use of technologies in supply chains could bring operational benefits like cost reduction and service improvements and strategic benefits such as improvements in product planning and innovation” (Prajogo & Sohal 2013) The information technologies supporting business to enable it to be more competitive in the market. Additionally, the information technologies are the best strategies that a business can use to improve the business; because it can be easier to align IT services with the needs of your company and the enterprise architecture ensures fulfillment of the strategic objectives of a company aligning technology with business processes. In according with Lancioni “This ability includes quickly adjusting inventory levels, adding or reducing carriers when needed increasing the speed in reacting to customer service problems, more effectively managing distant facilities, reducing the level of paperwork in a supply chain system, adjusting material throughput when necessary, tracking shipments more accurately developing cost effective purchasing strategies, improving production scheduling and reducing operational redundancy in supply chain systems”.

Conclusion In addition, to doing this research, I could find relevant information about the significant role that is playing the value chain into companies. The purpose of the essay is to provide assessment the role that could be obtained in business when is used the value chain process in the different departments of a company. The administration of change is of great importance, since it allows control of the transformation process. but in most organizations even greater challenge is managing change so that through leadership can attack low productivity, motivate the actions needed to alter behavior in a meaningful way and make the change take root in infusing culture and values of the business. It is of primary importance that business leaders must be updated and catch up on new models and theories about management, change and value chain. To be able to compete with the variety of existing competitors in business territory. In Conclusion, there is no possibility that organizations can achieve competitive goals, if the people who are not found suitable from the point of view of training and attitudes, to carry on. In essence, organizations today emphasize the ability of leaders to manage their staff. Therefore, people will go to those who can prove they have the will and capacity to meet their needs, enhancing their strengths and improving their skills. Thus man becomes the protagonist of the success of any business strategy. References: San Miguel, J, 1996, Value chain analysis for assessing competitive Advantage. Institute of Management Accountants. Canada. Staying competitive in the global economy (2008) Secretary-General of the OECD